Question: 6. After completing Appendix 10, consider a market whose heterogeneity in demand can be described with a uniformly distributed taste parameter varying from 0

6. After completing Appendix 10, consider a market whose heterogeneity in demand can be described with a uniformly distributed taste parameter varying from 0 to 1. The firm produces two products: the base product A, at a variable cost of V = $50, and the add-on product B, at a variable cost of V = $10. Assume zero fixed costs. Let the base product be valued by the most-demanding customers at $ = $100 and the add-on product be valued by the most-demanding customers at S = $500. a. What is the optimal price of product A and product B? b. What fraction of the market would purchase product A under these assumptions? c. What fraction of the market would purchase product B under these assumptions? d. What would be the firm's profitability if the market had 10 million members? e. What portion of the profit would come from the base product, and what portion would come from the add-on product?

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